Mainfreight forecasts stronger second half, rules out growth by acquisition

Group MD Don Braid said Australia "like their cricket and rugby teams, could do a bit better." Photo / Natalie Slade

Mainfreight is forecasting a better second half of the year, after indicating its first quarter to June 2019 "could have been better."

The logistics and freight operator, which is famous for its 100-year view, gave a trading update of sorts at its annual meeting late yesterday in Auckland.

Group managing director Don Braid said that the timing of Easter this year had meant fewer trading days and pointed out that Australia "like their cricket and rugby teams, could do a bit better."

Braid said while it was a bit quieter, there were benefits in being a global player with Europe, America and Asia contributing "quite nicely". The sales pipeline for the next quarter was "reasonably full," the Mainfreight executive added, saying economic conditions were concerning, but could be offset with stronger sales activity.

A hard Brexit would good for Mainfreight due to the level of advice UK shippers would need from the firm, and the China-US trade war had simply meant more trade out of Vietnam, Malaysia and Thailand, Braid said.

For the year ended March, the company posted revenue of $2.95 billion, up by almost 13 percent, and net profit at $137.6 million, rising almost 28 percent from $107.7 million the previous year.

Braid noted it was good to see that the company now makes more of its profits - 56.6 percent - abroad, adding "we are not finished here in New Zealand. It is strong and continues to be, but we are getting traction in other countries."

For the first time, Mainfreight broke down its three core divisions; warehousing, air and ocean, and transport.

Transport revenue was up to $1.45 billion, a 12 percent increase on the year prior, with earnings before interest, tax, depreciation and amortisation up 22 percent to $156.7 million. Warehousing revenue rose about 20 percent to $346 million, with ebitda at $37.28 million. Air and Ocean revenue rose to $1.16 billion and operating earnings $63 million, up by 18 percent.

Braid said a key performance indicator was how many of its top 500 customers used all three divisions, and that had risen from 28 to 31 percent its last reporting year.

Braid said he is often asked whether Mainfreight has any acquisitions on the cards, but sees the company's organic growth as enough.

"Frankly, with all the capital expenditure we have planned, we don't have any money to go out and buy another business. Why would we when we don't have the time or patience to convert those businesses with other bad habits into Mainfreight?"

Net capital expenditure was $89.2 million but for the 2020 financial year it is forecast to total $213 million.

Prompted by shareholder questions, Mainfreight gave insight into how its company bonus scheme works. This year qualifying team members received a share of $27.2 million, which is $6.5 million more than the year before.

Not every employee gets this bonus, shareholders were told at yesterday's annual meeting. To qualify, a branch must be profitable and have performed better than the prior year.

Mainfreight then takes 11 percent of the profit and divides that equally among those full-timers have worked at the branch for more than one year. Part-timers get a bit less, chair Bruce Plested said.

(BusinessDesk)